WHEN: Today, Wednesday, May 31st
WHERE: CNBC's "Squawk Alley"
Following is the unofficial transcript of a CNBC interview with Netflix Founder and CEO Reed Hastings and CNBC's Julia Boorstin on "Squawk Alley" (M-F, 11AM-12PM ET) today, Wednesday, May 31st from the Code Conference in California. Following are links to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000623220, http://video.cnbc.com/gallery/?video=3000623215 and http://video.cnbc.com/gallery/?video=3000623221.
All references must be sourced to CNBC.
CARL QUINTANILLA: WELCOME BACK TO THE 2017 CODE CONFERENCE IN CALIFORNIA. JOINING US ON SET THIS MORNING OUR OWN JULIA BOORSTIN WITH A VERY SPECIAL GUEST, JULIA.
JULIA BOORSTIN: CARL THANKS SO MUCH. WE ARE JOINED BY REED HASTINGS CEO OF NETFLIX, FRESH ON THE LAUNCH OF "HOUSE OF CARDS." NEW SEASON LAUNCHED LAST NIGHT.
REED HASTINGS: YES IT IS EXTRAORDINARY. I KNOW EVERYONE IS A LITTLE TIRED OF POLITICS. HOUSE OF CARD HAS A VERY FRESH TAKE ON CHAOS.
BOORSTIN: THE QUESTION IS IS THE POLITICAL CLIMATE DRIVING MORE VIEWING TO HOUSE OF CARDS?
HASTINGS: WELL WE WILL SEE IT JUST LAUNCHED YESTERDAY. WHEN YOU SEE WHAT CAN HAPPEN WITH FRANK AND CLAIRE UNDERWOOD, IT BRINGS APPRECIATION WE ARE NOT IN TOTAL CHAOS TODAY.
BOORSTIN: CAN YOU GIVE US ANY SENSE OF HOW MANY PEOPLE ACTUALLY WATCHED THE FIRST NIGHT OF HOUSE OF CARDS?
HASTINGS: ABSOLUTELY NOT. IT IS ONE OF THE GREAT THINGS ABOUT NETFLIX IS WE DON'T HAVE TO RELEASE RATINGS. EACH SHOW GETS TO HAVE ITS OWN AUDIENCE BECAUSE IT IS VERY PERSONALIZED. AROUND THE WORLD, "HOUSE OF CARDS" IS SUPER POPULAR.
BOORSTIN: AMAZON AND HULU EVERYONE IS RAMPING UP INVESTMENT IN ORIGINAL CONTENT THAT IS STREAMING DIRECT TO CONSUMER LIKE NETFLIX. ARE YOU SEEING ANY IMPACT FROM AMAZON AND HULU'S INVESTMENT IN THESE NEW SHOWS LIKE HULU HAS HANDSMAIDS TALE?
HASTINGS: BOTH OF US, AMAZON, US, HULU AND A LOT OF INTERNATIONAL PLAYERS, SKY AND GLEAM AND OTHERS ARE INVESTING IN ORIGINAL CONTACT. PEOPLE WANT ON DEMAND. THEY WANT TO BE ABLE TO CONTROL WHEN AND HOW THEY WATCH. WITH THAT, WE ARE GROWING A WHOLE INDUSTRY. SO IT IS A MIX OF YES, IT IS COMPETITION THAT HURTS AND ON THE OTHER HAND, IT IS GETTING INTERNET VIEWING MORE POPULAR WITH EVERYONE.
BOORSTIN: YOU SAID YOU ARE GOING TO SPEND $6 BILLION ON ORIGINAL CONTENT THIS YEAR. HOW MUCH IS THAT GOING TO HAVE TO INCREASE IN LIGHT OF EVERYONE ELSE GETTING INTO THIS GAME AS WELL?
HASTINGS: A LOT. AS WE GROW THE MEMBERSHIP BASE, WE WANT TO GROW THE CONTENT BUDGET. THERE ARE SO MANY GREAT SHOWS ON NETFLIX BUT THERE ARE SO MANY GREAT SHOWS WE DON'T YET HAVE. WE ARE GOING TO CONTINUE AS WE GROW THE MEMBERSHIP BASE TO TRY TO GET MORE SHOWS AND MORE MOVIES.
BOORSTIN: CAN YOU GIVE US A SENSE OF HOW MUCH THAT SPENDING IS GOING TO RAMP AND HOW MUCH OF THAT RAMP WILL BE BECAUSE OF COMPETITION FOR THAT CONTENT? IS THAT GOING TO PUSH PRICES UP?
HASTINGS: IT REALLY HAS. BEEN GREAT FOR TALENT AND WRITERS FOR EVERYONE. THERE IS SO MUCH COMPETITION NOW BETWEEN ALL THE NEW PLAYERS PLUS THE EXISTING PLAYERS, LIKE HBO, ARE BEGINNING TO GROW. IT IS THIS NEW AGE OF TELEVISION. NOBODY IS SURE WHERE IT IS GOING, EXCEPT FOR THE QUALITY OF MOVIES AND TV SHOWS IS CONTINUING TO DECLINE.
BOORSTIN: THE QUALITY MAY BE CONTINUING TO DECLINE. THE QUESTION IS WHAT'S THE IMPACT ON THE MOVIE BUSINESS? MEMORIAL DAY WEEKEND THE U.S. BOX OFFICE HAD ITS WORST WEEKEND IN 18 YEARS. IS THAT BECAUSE OF NETFLIX?
HASTINGS: IT IS PROBABLY A LITTLE BIT BECAUSE OF THE INTERNET, NOT JUST NETFLIX BUT PEOPLE WATCHING ON YOUTUBE AND AMAZON AND NETFLIX. ALL OF THE INTERNET CONSUMPTION IS GETTING BETTER OR IT MAY BE JUST THERE WAS NO GREAT BIG MOVIE OPENING.
JON FORTT: REED, TELL ME THE IMPACT OF COMEDY. DAVE CHAPPELLE WAS PROBABLY BIG FOR YOU GUYS. I SAW MINAGE JUST LAUNCHED OVER THE PAST FEW DAYS, ALI WONG HAS BEEN BUZZY. IS THIS A TYPE OF CONTENT THAT PEOPLE ARE MORE LIKELY TO TALK ABOUT IN A CERTAIN WAY OR MAYBE TO REPEAT WATCH? HOW DOES THAT AFFECT YOUR SUBSCRIBERS?
HASTINGS: FIRST, YOU DID COMEDY LIKE MASTER OF NONE AND KIMMY SCHMIDT AND COMEDY SERIES AND THEN THERE IS STANDUP COMEDY WE ARE DOING REALLY WELL IN. WE WILL CONTINUE TO BRING MORE TALENT YOU TRY TO DEVELOP TALENT WHEN THEY ARE EARLY IN THEIR CAREER LIKE ALI WONG AND WHEN THEY ARE EPIC LIKE DAVE CHAPPELLE AND FIRST TIME BACK IN POPULAR TELEVISION 10-15 YEARS.
FORTT: DO PEOPLE WATCH IT DIFFERENTLY THOUGH?
HASTINGS: THE GREAT THING ABOUT THE INTERNET IS THEY WATCH IT HOW AND WHEN THEY WANT. SOME PEOPLE WATCH IT ON THE PHONE. SOME PEOPLE WATCH IT ON THE BIG SCREEN TV AND PEOPLE DO REPEAT WATCH THOSE SHOWS IN PARTICULAR.
BOORSTIN: ONE OF THE OTHER CATEGORIES YOU HAVE BEEN MOVING INTO IS MOVIES, WAR MACHINE, COST YOU $60 MILLION AND YOU ALSO PUT IT IN THEATERS LAST WEEKEND. WAS THAT INVESTMENT WORTH IT, PUTTING IT IN THEATERS AND SPENDING $60 MILLION JUST TO MAKE IT.
HASTINGS: SOME PEOPLE LOVE TO WATCH IN THE MOVIE THEATRES AND THAT'S FINE. WE WANT TO HAVE CONSUMERS BE ABLE TO CHOOSE. SO FAR, THE LARGE CHAINS IN THE US LIKE AMC AND REGAL HAVE NOT CARRIED THESE FILMS, SO THEY ARE IN VERY SMALL THEATERS. WE HOPE OVER TIME THAT THE THEATERS WILL WAKE UP AND SAY WE SHOULD PROVIDE CONSUMERS CHOICE. WE ARE INTO GIVING CONSUMERS CHOICE. THEY CAN WATCH IT ON NETFLIX OR IN THE THEATERS ON THE SAME DAY.
BOORSTIN: DO YOU THINK YOU ARE GOING TO BE ABLE TO PRESSURE THEATERS TO CHANGE THE WHOLE MODEL AND TAKE MOVIES THE SAME DAY THEY ARE ON NETFLIX?
HASTINGS: CONSUMERS MAY PRESSURE THE THEATRES IT IS NOT REALLY FOR US TO DO. WE ARE TRYING TO PRODUCE THE GREATEST CONTENT AND HAVE IT BE ON NETFLIX. WE ARE ALSO OPEN TO THE MOVIE SOME PEOPLE WOULD PREFER THE BIG SCREEN EXPERIENCE. THAT'S FINE.
BOORSTIN: DO YOU THINK OTHER STUDIOS WILL FOLLOW SUIT AND TRY TO CLOSE THAT WINDOW BETWEEN THEATRICAL RELEASE AND HOME VIDEO?
HASTINGS: THERE ARE SOME GREAT ARTICLES FROM 2011. FOUR STUDIOS HAVE AGREED FOR THE MOVIE TO DO X AND IT NEVER HAPPENS. IT IS HARD TO SAY. IT IS A SLOW MOVING INDUSTRY.
QUINTANILLA: THERE HAS BEEN SOME SELL SIDE RESEARCH LATELY THAT ARGUES THE STREET MAY BE DRAMATICALLY UNDERESTIMATING YOUR LONG-TERM?
HASTINGS: UNDERESTIMATING. THAT'S A DIFFERENT QUESTION.
QUINTANILLA: I KNOW. MAYBE UNDERCOUNTING YOUR LONG-TERM SUB-BASE AT LEAST DOMESTICALLY. WHY AREN'T YOU MORE AGGRESSIVE WITH THE STREET AND PROMISING MORE AT LEAST ON THE OUT YEARS?
HASTINGS: EXCEPT FOR VISITING WITH YOU GUYS ONCE A YEAR, I DON'T SPEND A LOT OF TIME ON THE STREET. IT IS FOCUSED ON HOW DO WE MAKE THE BEST EXPERIENCE POSSIBLE AND THAT WILL DETERMINE OUR GROWTH. WE FOCUS ON THE SHOWS, STREAMING, INTERFACE ALL OF THOSE THINGS.
QUINTANILLA: IS THE RATE OF CORD CUTTING WHICH IS ACCELERATING, IS THAT FORCING YOU TO RECALIBRATE YOUR LONG-TERM EXPECTATIONS OF SUB GROWTH?
HASTINGS: VERY FEW PEOPLE HAVE CUT THE CORD. WE ARE ABOUT 50 MILLION IN THE U.S. WE HAVE SEEN MAYBE 2 MILLION OR 3 MILLION OF 50 CUT THE CORD. DON'T THINK OF IT AS A BIG OVERLAP THAT WE ARE DRIVING CORD CUTTING THAT IS PROBABLY MOSTLY FROM PRICING. IN GENERAL IF YOU LOOK AT CORD CUTTING, IT IS LIKE 2%-3% PER YEAR, LIKE BROADCAST RATINGS OVER THE LAST 30 YEARS. IT WILL TAKE A VERY LONG, SLOW, SECULAR DECLINE NO BIG CALAMITY AND THEN THEY WILL ADJUST THE ECONOMICS.
BOORSTIN: DO YOU THINK YOU ARE NEARING SATURATION HERE IN THE U.S.? YOU ARE INVESTING IN AGGRESSIVELY EXPANDING ABROAD. DO YOU THINK HERE YOU ARE REACHING SATURATION?
HASTINGS: ABSOLUTELY IF WE KEPT THE PRODUCT THE SAME, WE SAID NO MORE IMPROVEMENTS THEN WE WOULD SATURATE BUT WE ARE CONTINUING TO IMPROVE NETFLIX. WE ARE MAKING THE STREAMING INCREDIBLE NOW WE HAVE HD, 4 K AND HDR. IF YOU BUY A NEW TV, IT IS INCREDIBLE HOW IT LOOKS. IT IS MUCH BETTER THAN A MOVIE THEATER. WE ARE ADDING MORE AND MORE SHOWS. WE KEEP PUSHING OFF THAT SATURATION.
BOORSTIN: AS YOU IMPROVE THE PRODUCT, ARE YOU GOING TO NEED TO RAISE THE PRICES AS YOU HAVE IN THE PAST?
HASTINGS: WHAT WE HAVE DONE IS KEPT OUR BASE PRICE, $7.99. IT HAS BEEN EIGHT YEARS. WE HAVE MOVED THE HD AND THE UPPER TEARS BUT THE BASE TIER HAS STADIUM THE SAME PRICE FOR EIGHT YEARS. YOU GET ALL THE CONTENT. IT IS COMPLETELY UNLIMITED VIEWING.
FORTT: LET ME ASK YOU ABOUT DEVICES. HOW MUCH VOLATILITY IS THERE IN THE WAY PEOPLE ARE WATCHING, WHETHER IT IS ON THE COUCH WATCHING A BIG SCREEN TV OR WATCHING A MOBILE DEVICE, ESPECIALLY NOW THAT YOU CAN SAVE THE CONTENT AND VIEW IT OFFLINE?
HASTINGS: THE OFFLINE VIEWING IS GREAT FOR AIRPLANES AND THOSE KIND OF SITUATIONS. MOST OF THE VIEWING IS STILL ON THE BIG SCREEN, ON THE TELEVISION.
FORTT: THERE IS NOT A BIG SHIFT TOWARD MOBILE DEVICES? IT IS PRETTY STABLE MOST OF THE VIEWING IS ON TV?
HASTINGS: IT HAS BEEN REMARKABLE OVER THE PAST TEN YEARS OF STREAMING, IT HAS BEEN ABOUT TWO-THIRDS OF THE VIEWING IS ON LARGE SCREEN TELEVISIONS, EITHER FROM YOUR XBOX OR PLAYSTATION OR DIRECTLY WITH THE SMART TV.
BOORSTINS: IS THE SAME THING TRUE OVERSEAS OR ARE YOU SEEING DIFFERENT VIEWING HABITS IN INDIA?
HASTINGS: IN ASIA, IT IS MUCH MORE MOBILE PHONE CENTRIC.
BOORSTIN: DOES THAT CHANGE THE WAY YOU PROGRAM WHEN YOU EXPECT PEOPLE TO BE WATCHING ON THEIR PHONE AND NOT ON THEIR TELEVISION.
HASTINGS: WHEN YOU GET USED TO WATCHING ON A MOBILE PHONE, YOU WATCH ALL KINDS OF CONTENT AND SPORTS ON A PHONE. YOU ADAPT TO THAT. WE ARE JUST DOING GREAT CONTENT AND IT IS AVAILABLE ON ANY SCREEN.
FORTT: WHAT'S THE EFFECT OF 4K ON THE VOLUME OF CONSUMPTION? IF SOMEBODY HAS THAT BIG, RICH SCREEN, ARE THEY GOING TO WATCH MORE NETFLIX BECAUSE YOU HAVE MORE 4K CONTENT THAN ELSEWHERE?
HASTINGS: YOU PAID $1,000 FOR A NEW TELEVISION, YOU ARE GOING TO USE IT. YOU LOOK FOR THE SHOWS AND THE IMAGES. WITH THAT AND WITH HDR, WHICH HAS A COLOR INTENSITY. IT MAKES THE TV JUST POP.
FORTT: SHOULD WE LOOK AT 4K TV SALES AS A LEADING INDICATOR AS FAR AS ENGAGEMENT IN NETFLIX?
HASTINGS: ABSOLUTELY. 4K TRANSFORMS THE IN-HOME EXPERIENCE. THAT'S ONE OF THE BIG DRIVERS AND WITH MOBILE ON THE LOW END.
QUINTANILLA: WE TALK A LOT ABOUT MACHINE LEARNING, ESPECIALLY AT THIS CONFERENCE. HOW MUCH BETTER NOW IS THE ALGORITHM AT HAVING A SUGGESTION FOR YOU THAN IT WAS FIVE YEARS AGO?
HASTINGS: YOU KNOW, IT IS HARD TO BE PRECISE ON IT, BUT IT FEELS A LOT BETTER. AND SOME OF THAT IS BECAUSE WE HAVE MORE SHOWS THAT IT CAN CHOOSE FROM AND SOME OF THAT IS BECAUSE THE ALGORITHM ITSELF IS BETTER. AND LIKE LOTS OF COMPANIES, WE ARE INVESTING HEAVILY IN THOSE AREAS BECAUSE WE WANT IT TO BE YOU TURN ON NETFLIX AND THERE'S A ROW, THERE'S LIKE FOUR CHOICES, AND YOU JUST WANT TO WATCH THEM ALL. AND SO, TO GET TO THAT CONSISTENT VIEW IS WHERE WE ARE TARGETING.
QUINTANILLA: I WONDER IF YOU EVER FIND YOURSELF WATCHING NETFLIX AT HOME AND SCROLLING THROUGH DOZENS AND DOZENS OF THINGS AND YOU DON'T WANT TO WATCH ANY OF THEM?
HASTINGS: YOU KNOW, I HAVE OBSCURE TASTE. SO LIKE, I JUST WATCHED THIS SWEDISH MOVIE WE HAVE ON NETFLIX, FORCE MAJEURE. AND IT IS REALLY TRAGIC BECAUSE IT IS A FAMILY THEN AN AVALANCHE COMES AND THE DAD PANICS AND RUNS AWAY, LEAVING THE FAMILY TO DIE. WELL, THEN, THE AVALANCHE TURNS AND DOESN'T KILL THEM AND THEN THEY HAVE TO PIECE TOGETHER BACK THEIR MARRIAGE AFTER THIS DRAMATIC EVENT. SO YOU KNOW, IT'S LIKE OBSCURE TASTE.
BOORSTIN: NOT NECESSARILY A RECOMMENDATION.
HASTINGS: FORCE MAJEURE, IT'S GREAT.
BOORSTIN: NOW, OVER THE PAST 15 YEARS, YOU HAVE REALLY TRANSFORMED THE COMPANY IN DIFFERENT WAYS. WHAT IS GOING TO BE YOUR NEXT ACT? DO YOU NEED TO INVEST IN NEWS AND SPORTS AS SORT OF THE NEXT THING FOR NETFLIX?
HASTINGS: YOU KNOW, NO PLANS ON NEWS AND SPORTS. THOSE ARE TOUGH BUSINESSES AND WE'VE GOT A LOT OF ROOM TO GROW IN MOVIES AND TV SHOWS. EXPANDING INTO STANDUP COMEDY. UNSCRIPTED. SO, WE ARE GOING TO REALLY FOCUS ON THAT ON A GLOBAL BASIS.
BOORSTIN: BUT WHAT ABOUT GLOBALLY? IS THERE ANY WAY YOU INVEST IN, SAY, CRICKET RIGHTS IN INDIA OR SOME OTHER TYPE OF INTERNATIONAL SPORTS RIGHTS RATHER THAN BIDING FOR NFL RIGHTS HERE?
HASTINGS: YOU KNOW, WE WOULD DO MOVIES ABOUT SPORTS. THAT WOULD BE A GOOD AREA FOR US. BUT IT IS THINGS YOU WANT TO REPEAT VIEW. IT'S THINGS THAT YOU DON'T ONLY WANT TO CONSUME ONCE. WHEREAS THE WARRIORS AND THE CAVALIERS ARE GOING UP AGAIN AND PEOPLE WILL BE INTENSE ON THAT AND THEN IT WON'T – YOU KNOW, AFTERWARDS, THERE IS NO AFTER VIEWING. WHEREAS OUR SHOWS, THERE REALLY IS.
BOORSTIN: BUT AS AMAZON PRIME VIDEO TRIES TO RECREATE A LOT OF WHAT NETFLIX IS DOING, WHAT DO YOU MAKE OF THEM BUYING THOSE NFL RIGHTS FOR TEN GAMES NEXT SEASON?
HASTINGS: WELL, THEY ARE SO SCARY. I MEAN, EVERYTHING AMAZON DOES IS JUST SO AMAZING. I MEAN, HOW ARE THEY DOING SO MANY DIFFERENT BUSINESS AREAS SO WELL? IT'S LIKE THEY ARE TRYING TO REPEAL THE BASIC LAWS OF BUSINESS OF LIMITED CAPABILITY. SO, WE ARE CONTINUING TO WATCH THEM AND BE IMPRESSED WITH THEM. AND THEY ARE HELPING TO GROW THE INDUSTRY BECAUSE THEY ARE INVESTING IN THE CONTENT.
BOORSTIN: BUT ARE THEY SCARIER – ARE THEY YOUR BIGGEST THREAT?
HASTINGS: THEY'RE AWFULLY SCARY, I WOULD SAY. I DON'T KNOW IF THEY ARE THE BIGGEST, BUT THEY ARE AWFULLY SCARY.
QUINTANILLA: IN TERMS OF STREAMING OPTIONS, WE'VE TALKED ABOUT, JON, SUBSCRIPTION FATIGUE FOR A LONG TIME. YOU THINK WE'VE TOPPED OUT ON THAT? ARE THERE TOO MANY OPTIONS TO STREAM RIGHT NOW?
HASTINGS: NO, I THINK THERE ARE LOTS OF NEW PROVIDERS LIKE, IN THE U.S., CBS ALL-ACCESS. AROUND THE WORLD THERE'S ALL KINDS OF NEW OPTIONS COMING UP THAT GIVE PEOPLE OPPORTUNITY. IT IS LIKE SAYING THERE ARE TOO MANY MOBILE PHONE APPS. YOU KNOW, THERE'S 100,000 BUT YOU PROBABLY ONLY PAY ATTENTION TO 30. BUT DIFFERENT PEOPLE HAVE A DIFFERENT SET OF THEM. SO, I THINK IT IS GREAT.
FORTT: DO YOU THINK ABOUT LEVERAGING YOUR SUBSCRIBER BASE IN DIFFERENT WAYS? I MEAN, PEOPLE TALK ABOUT CREDIT CARDS ON FILE AS BEING AN ENORMOUSLY VALUABLE ASSET. AND YOU HAVE A LOT OF THEM. I MEAN, YOU COULD BOLT ON OTHER PEOPLE'S SUBSCRIPTION SERVICES THAT PERHAPS HAVE NOTHING TO DO WITH CONTENT. IS THAT SOMETHING YOU'VE THOUGHT ABOUT?
HASTINGS: YOU KNOW, IF WE TRY TO OUT-AMAZON AMAZON, THEN THAT'S A LOSING BATTLE. SO WHAT WE HAVE TO DO IS BE THE SPECIALTY PLAY. WE ARE TRYING TO BE STARBUCKS AND THEY ARE TRYING TO BE WALMART. SO, WE HAVE TO HAVE BRAND INTENSE LOVE AND FOCUS. AND WHAT THEY DO IS INCREDIBLE AT THEIR BREADTH. SO NO, WE WOULDN'T FOCUS ON THOSE THINGS. WE WOULD FOCUS ON HOW DO WE BE, REALLY, THE EMBODIMENT OF ENTERTAINMENT, AND JOY, AND MOVIES AND TV SHOWS.
BOORSTIN: WHAT ABOUT INTERNATIONALLY? LAST JANUARY, YOU LAUNCHED IN 130 NEW MARKETS AT THE SAME TIME. WAS THAT TOO MUCH TO DO AT ONCE?
HASTINGS: MAYBE, BUT IT WAS FUN.
BOORSTIN: BUT A LOT OF PEOPLE WOULD SAY THAT SOME OF THE MARKETS YOU ARE REALLY PUSHING INTO NOW LIKE INDIA AND SOUTH KOREA, THEY ARE A LOT MORE COMPLICATED. IS IT HARDER? IS IT GOING TO REQUIRE MORE INVESTMENT IN EACH OF THESE NEW MARKETS TO MASTER THE LOCAL LANGUAGE CONTENT?
HASTINGS: IT DEFINITELY IS MORE COMPLICATED FOR A U.S. COMPANY. BUT FOR AN INDIAN COMPANY, THEY FEEL FINE ABOUT IT.
BOORSTIN: NO, BUT FOR YOU, IS THIS GOING TO BE A BIGGER BARRIER TO GROW TO THOSE MARKETS?
HASTINGS: YEAH, I THINK SO. WE STILL HAVE A LOT TO LEARN. NOW, WE'VE DONE AWFULLY WELL IN LATIN AMERICA AND IN EUROPE AND, OF COURSE, IN NORTH AMERICA. SO, WE'VE LEARNED SOME THINGS. BUT WE HAVE A LOT OF ROOM TO GROW IN ASIA AND A LOT TO FIGURE OUT STILL.
BOORSTIN: WHAT ABOUT CHINA? YOU ARE LICENSING TO CHINA. BUT ARE YOU STILL TRYING TO LAUNCH THERE OR IS THAT OFF THE TABLE?
HASTINGS: I THINK THAT'S OFF THE TABLE FOR THE NEXT COUPLE OF YEARS.
QUINTANILLA: IS THE TREND TOWARD PRODUCING IN COUNTRY OR TRYING TO AMORTIZE YOUR COST – THE SAME PRODUCT ACROSS MANY COUNTRIES AND LANGUAGES? AND ALSO, IS THE TREND TOWARD HIGHER BUDGET – MARCO POLO-ISH TYPE THINGS – OR TRY TO KEEP THAT UNDER CONTROL?
HASTINGS: NO, IT IS GOING BIG BUDGET, FOR SURE. BECAUSE AS WE GET A BIGGER DISTRIBUTION, WE CAN AFFORD MORE SPECTACULAR ENTERTAINMENT. WE HAVE A GERMAN SERIES, "DARK," THAT IS COMING OUT IN A FEW MONTHS. THAT IS SCIENCE FICTION AND VERY, I THINK, WILL BE A BIG GLOBAL WINNER. OF COURSE, "3%" OUT OF BRAZIL HAS BEEN VERY POPULAR AROUND THE WORLD. SO, WE ARE DOING A NUMBER OF SHOWS OUTSIDE OF HOLLYWOOD AND WE'RE DOING A LOT OF SHOWS INSIDE OF THE HOLLYWOOD SYSTEM.
FORTT: HOW IMPORTANT IS IT TO HAVE A REALLY GOOD BATTING AVERAGE AND GOOD DATA BEHIND IT IF YOU ARE GOING TO MAKE THOSE BIG BUDGET BETS? BECAUSE, I MEAN, A BUNCH OF THOSE WILL SINK A STUDIO.
HASTINGS: YEAH, AND YOU KNOW, WHAT REALLY MATTERS IS I HOPE OUR HIT RATIO IS WAY TOO HIGH RIGHT NOW. SO, WE'VE CANCELLED VERY FEW SHOWS.
BOORSTIN: BUT IT IS HARD WHEN YOU DON'T GIVE US RATINGS OR VIEWER NUMBERS.
HASTINGS: WELL, YOU CAN TELL WHEN WE CANCEL A SHOW. SO, I'M ALWAYS PUSHING THE CONTENT TEAM, WE HAVE TO TAKE MORE RISK, YOU HAVE TO TRY MORE CRAZY THINGS, BECAUSE WE SHOULD HAVE A HIGHER CANCEL RATE OVERALL. BECAUSE THEN, WHAT YOU GET IS YOU GET SOME WINNERS THAT ARE JUST UNBELIEVABLE WINNERS LIKE "13 REASONS WHY" OVER THE LAST THREE MONTHS HAS BEEN A BIG HIT FOR US. AND YOU KNOW, IT SURPRISED US TOO. I MEAN, IT WAS A GREAT SHOW, BUT WE DIDN'T REALIZE JUST HOW IT WOULD CATCH ON.
FORTT: WHAT'S THE HIGH WATER MARK OF CRAZY?
HASTINGS: THAT WOULD BE VERY FAR OUT. I DON'T KNOW. I WILL HAVE TO THINK ABOUT THAT.
BOORSTIN: BUT YOU DEFINE A SHOW NOT BY HOW MANY PEOPLE WATCH IT, BUT BY HOW MANY NEW SUBSCRIBERS YOU GET?
HASTINGS: IT'S A MIX. MOSTLY, IT IS HOW MANY PEOPLE WATCH IT BECAUSE – BUT THOSE ARE VERY CONNECTED.
QUINTANILLA: BUT YOU SAY YOU WERE SURPRISED AT "13 REASONS."
HASTINGS: YEAH.
QUINTANILLA: I MEAN, ARE YOU NOT – ARE YOU GREEN LIGHTING BY GUT? OR ARE YOU USING METRICS AND A.I., OSTENSIBLY TO –
HASTINGS: WELL, FORTUNATELY, IT'S NOT MY GUT. IT'S TED SARANDOS, WHO HAS BEEN JUST BRILLIANT AT THIS AND HIS TEAM OF FINDING THINGS. AND THERE'S SOME ANALYSIS THAT GOES ON, BUT I WOULD SAY IT'S FUNDAMENTALLY A CREATIVE BET. AND THEN WE GET TO SEE IN THE FULLNESS OF TIME HOW IT WORKS.
BOORSTIN: I HAVE TO ASK YOU A QUESTION ABOUT NET NEUTRALITY. I KNOW YOU ARE A BIG ADVOCATE FOR NET NEUTRALITY.
HASTINGS: YEAH.
BOORSTIN: HOW CONCERNED ARE YOU ABOUT PRESIDENT TRUMP'S AND HIS ADMINISTRATION'S DECISION TO CHANGE THE RULES?
HASTINGS: YOU KNOW, WE WILL SEE IF THEY DO CHANGE THE RULES. THAT WOULD BE UNFORTUNATE, BUT IT IS PROBABLY GOING TO HAPPEN. AND I DON'T THINK IT WILL BE A BIG DEAL. I THINK THE PRINCIPLES OF NET NEUTRALITY ARE VERY WELL ACCEPTED BY ALL THE LARGE ISPs AROUND THE WORLD – NOT JUST IN THE U.S. AND IN MANY COUNTRIES, WE DON'T HAVE NET NEUTRALITY LAWS, BUT WE DON'T HAVE PROBLEMS EITHER.
BOORSTIN: BUT WILL IT RAISE YOUR COSTS IF THE RULES ARE CHANGED?
HASTINGS: I DON'T THINK SO. THAT WOULD BE VERY UNLIKELY. SO AGAIN, NET NEUTRALITY IS REALLY IMPORTANT, BUT I THINK BASICALLY THERE IS A CONSENSUS AMONGST ISPs AROUND THE WORLD TO FOLLOW THOSE RULES. AND SO, EVEN IN COUNTRIES WHERE THERE AREN'T LAWS, WE DON'T SEEM TO HAVE PROBLEMS.
FORTT: IF ANYBODY IN SILICON VALLEY SHOULD BE FREAKING OUT ABOUT TITLE 2 GOING AWAY, IT SHOULD BE YOU. SO, WHY IS EVERYBODY ELSE FREAKING OUT? IF YOU ARE SAYING, UH, PROBALBY NOT A BIG DEAL. AND I AM GUESSING YOU ARE SAYING THAT BECAUSE YOUR SUBSCRIBERS WOULD PITCH A FIT IF YOU TOLD THEM YOUR ISP IS GETTING INBETWEEN YOU AND YOUR "HOUSE OF CARDS."
HASTINGS: YEAH, WE ARE ONE OF THE LARGEST SUPPLIERS OF STREAMING. AND SO, WE ARE PROBABLY RELATIVELY INSULATED. THE REAL IMPACT AROUND NET NEUTRALITY WOULD BE ON SMALL FIRMS, YOU KNOW, THE NETFLIX OF TEN YEARS AGO. SO, IT IS SUPER IMPORTANT, AGAIN, FOR THE SOCIETY. BUT I THINK EVEN IF THEY UNWIND THE TITLE TWO RULES, MY GUESS WOULD BE THAT THE NET NEUTRALITY PRINCIPLES ARE STILL FOLLOWED.
BOORSTIN: WE ARE HEARING A LOT ABOUT THE TRUMP ADMINISTRATION HERE AT THE CODE CONFERENCE. ARE THERE ANY OTHER ISSUES THAT YOU ARE WATCHING OR ARE CONCERNED ABOUT, SUCH AS IMMIGRATION?
HASTINGS: YOU KNOW, THERE ARE MANY ISSUES GOING ON, BUT FOR THE MOST PART WE ARE FOCUSED ON THE ENTERTAINMENT SIDE OF IT. THE "HOUSE OF CARDS" ASPECT. GIVE PEOPLE A LITTLE RELIEF FROM ALL OF THE STRESS.
FORTT: IS IT HARDER TO FIND STORY LINES IN POLITICS THAT ARE UNREASONABLE OR ENTERTAINING ENOUGH THAT YOU AREN'T WRITING THEM DOWN?
HASTINGS: YEAH, SEE, I THINK YOU COULD NEVER HAVE IMAGINED THE CURRENT SITUATION.
BOORSTIN: WELL, DO YOU SEE VIEWING HABITS CHANGING IN LIGHT OF THE POLITICAL CLIMATE? ARE PEOPLE TRYING TO WATCH DIFFERENT KINDS OF SHOWS AS A RESULT OF IT?
HASTINGS: NO, AND REMEMBER WE ARE VERY GLOBAL. SO, WE ARE ABOUT 50% OF THE MEMBERS ARE INTERNATIONAL. AND SO THERE ARE DIFFERENT SITUATIONS ALL AROUND THE WORLD. SO, NO BIG CHANGE ON ENTERTAINMENT. IT IS REALLY DRIVEN BY THE INTERNET AND THE EXPANSION OF STREAMING.
BOORSTIN: LAST TIME WE SPOKE, YOU SAID YOU WERE MOST EXCITED ABOUT "THE CROWN." WHAT'S THE SHOW YOU ARE MOST EXCITED ABOUT NOW AND THAT YOU THINK COULD HAVE THE BIGGEST IMPACT ON NETFLIX?
HASTINGS: BIGGEST IMPACT ON NETFLIX. "GLOW." IT IS A FOLLOW-ON FROM JENJI TO "ORANGE IS THE NEW BLACK." IT'S A SET OF WOMEN WRESTLERS FROM THE 1970s. AND IT IS BOTH SPOOF AND FUNNY. AND THAT WILL BE COMING OUT A FEW WEEKS AFTER "ORANGE IS THE NEW BLACK."
QUINTANILLA: HAVE PEOPLE COME TO TERMS WITH ADAM SANDLER'S SUCCESS ON NETFLIX?
HASTINGS: THEY HAVE.
QUINTANILLA: I MEAN, IT'S MONSTROUS.
HASTINGS: AND THEN ADAM SANDLER WON GREAT CRITICAL AWARDS IN THE REPORT AT THE CANNES FILM FESTIVAL AS TALENT. SO, HE IS SO VERSATILE. PEOPLE WANT TO BOX HIM IN AND THINK HE IS JUST A CERTAIN GUY. AND HE IS MUCH BROADER THAN THAT AND REALLY ENTERTAINING.
QUINTANILLA: BUT WHAT MADE – I GUESS TED, ONCE AGAIN, RIGHT? SORT OF GOING WITH CASTING OFF TYPE IN A WAY, RIGHT?
HASTINGS: TED "GENIUS" SARANDOS. THAT'S RIGHT.
QUINTANILLA: IS IT IMPORTANT TO YOU WHETHER OR NOT A FILM IS ABLE TO BE CONSIDERED AT CANNES? THAT WAS A BIT OF A CONTROVERSY GOING INTO THIS LAST FILM FESTIVAL.
HASTINGS: SURE. I MEAN, LOOK, THE ESTABLISHMENT OFTEN CLOSES RANK AGAINST THE INSURGENT. AND WE RECOGNIZE THAT DYNAMIC AND FRANKLY WE PLAY IT FOR ALL ITS WORTH. IT IS A GREAT SYSTEM FOR US TO GET THESE FILMS OUT. OCHA WAS FEATURED AT THE CANNES FILM FESTIVAL. IT IS COMING OUT IN A MONTH. IT'S AN EXTRAORDINARY FILM FROM A WELL-KNOWN KOREAN DIRECTOR. AND I THINK IT IS GOING TO BE ONE OF THE MOST FASCINATING AND DIFFERENT KINDS OF FILMS THAT YOU SEE THIS YEAR. THANK YOU SO MUCH.
BOORSTIN: ALRIGHT, WELL WE KNOW YOU HAVE TO GO ON STAGE NOW. REED HASTINGS, THANKS SO MUCH FOR JOINING US. WE REALLY APPRECIATE IT.
About CNBC:
With CNBC in the U.S., CNBC in Asia Pacific, CNBC in Europe, Middle East and Africa, and CNBC World, CNBC is the recognized world leader in business news and provides real-time financial market coverage and business information to more than 385 million homes worldwide, including more than 94 million households in the United States and Canada. CNBC also provides daily business updates to 400 million households across China. The network's 15 live hours a day of business programming in North America (weekdays from 4:00 a.m. - 7:00 p.m. ET) is produced at CNBC's global headquarters in Englewood Cliffs, N.J., and includes reports from CNBC News bureaus worldwide. CNBC at night features a mix of new reality programming, CNBC's highly successful series produced exclusively for CNBC and a number of distinctive in-house documentaries.
CNBC also has a vast portfolio of digital products which deliver real-time financial market news and information across a variety of platforms including: CNBC.com; CNBC PRO, the premium, integrated desktop/mobile service that provides live access to CNBC programming, exclusive video content and global market data and analysis; a suite of CNBC mobile products including the CNBC Apps for iOS, Android and Windows devices; and additional products such as the CNBC App for the Apple Watch and Apple TV.
Members of the media can receive more information about CNBC and its programming on the NBCUniversal Media Village Web site at http://www.nbcumv.com/programming/cnbc.
For more information about NBCUniversal, please visit http://www.NBCUniversal.com.